First Harvest

Less than six months after Boeing and South African Airways (SAA) announced their plans to turn “energy tobacco” into sustainable aviation biofuel, farmers in South Africa’s Limpopo province are harvesting their first crop of a nicotine-free, energy-rich tobacco plant.

World regions

As aviation continues to become an integral part of life, it is bringing people closer together. As emerging markets continue to grow and new business models expand, airplane manufacturers are seeing greater geographical diversity in their customer base. In 1993, more than 73 percent of all traffic was carried by airlines in Europe or North America. By 2033, that proportion will shrink to 38 percent. Asia Pacific and Middle East airlines are becoming prominent in global aviation. The low-cost business model is becoming a viable option in emerging markets, offering consumers access to a wider range of destinations and the opportunity to choose the speed and convenience of flying over traditional modes of transportation. In addition, modern twin-aisle airplanes enable smaller operators in developing economies to compete on longer routes traditionally dominated by foreign carriers. Rapidly evolving aviation services in these regions are broadening the geographical balance of airplane demand, spurring a worldwide requirement for 36,770 new jet airplanes, valued at $5.2 trillion.

Regional focus

Different regions will still have varying conditions with specialized requirements. Middle Eastern airlines will still favor twin-aisle airplanes and premium passenger services to take advantage of the area's centrality and prominence in business travel. European and North American airlines respond to growing competition from low-cost carriers by replacing older, fuel inefficient airplanes with larger, more economical single-aisle models. In Asia, rising demand across the board will require a mix of single- and twin-aisle airplanes.

All regions will face similar challenges of fuel price volatility, emission control regimes, and ever-increasing airport congestion as the growing world fleet tries to keep pace with swelling international and local demand for air travel.

World market value: $5.2 trillion

World market value: $5.2 trillion

World market value: $5,200 billion

Today's market

Asia Pacific economies continue to have strong growth. In 2013, regional GDP rose 4.8 percent, driven both by the region's fast-growing, emerging economies and by the mature economies, which were lifted by recovery from the global recession. Passenger traffic grew 3.9 percent, slightly faster than capacity at 3.7 percent year-over-year growth. Despite high oil prices and fluctuating currency valuations, Asia Pacific airlines are estimated to have earned a net profit of $3.0 billion in 2013 and are forecast to earn $3.7 billion in 2014.

Continued liberalization

The structure of the Asia Pacific airline industry is changing as regulations liberalize and carriers expand beyond national boundaries. Cross-border cobranded subsidiary agreements and direct investment in foreign airlines allow established airlines access to new markets and promote expanded air service to small markets. The growth of air travel as low-cost carriers (LCC) reduce fares and open new markets testifies to the effects of liberalization. Improved affordability and accessibility will stimulate demand for air travel in established markets and meet the emerging travel needs of the growing middle class.

Asia Pacific new airplanes: 13,460

Asia Pacific market value: $2.02 trillion

Asia Pacific key indicators and new airplane markets

Strong demand

Continued economic growth is expected in the region over the next 20 years, with GDP averaging 4.4 percent growth annually. As income levels rise, Asia Pacific is set to become the largest air travel market in the world. In 2033, approximately 48 percent of global traffic will be to, from, or within the region. More than 100 million new passengers are projected to enter the market annually. By way of perspective, London Heathrow handles 70 million passengers and Atlanta 95 million annually.

To accommodate growing demand, the region will need 13,460 new airplanes, valued at $2,020 billion. By 2033, the fleet will be three times larger than it is today. Fast-growing LCCs and rapid traffic growth within the Asia Pacific region drive a need for 9,540 single-aisle airplanes. LCC market share in Asia is expected to grow from 15 percent today to 21 percent in 2033. Network carriers, the mainstay of international long-haul air transportation, will help drive demand for 3,570 widebody airplanes.

Air cargo also plays a crucial role, transporting goods over difficult terrain and vast stretches of ocean. Many of the world's largest and most efficient cargo operators are located in Asia. The region's air cargo will grow 5.5 percent per year. Carriers in the region are expected to take 360 new production freighters and 530 converted freighters.

China continues to be one of the fastest growing aviation markets

China's aviation market, one of the world's fastest growing, is going through dramatic changes. Regulatory and policy reforms, low-cost carrier (LCC) and other innovative business models, new technology airplanes, and evolving consumer behaviors are driving airlines to launch additional direct flights and develop more point-to-point networks.

We project that the current growth trend will continue over the next 20 years, with passenger traffic increasing 6.9 percent and air cargo traffic increasing 6.7 percent annually. The majority of the growth, approximately 65 percent, will be within China. About 16 percent of the growth will be international traffic to destinations within the Asia Pacific region. The remaining 19 percent will be long-haul international traffic. To support this growth in demand, China will need 6,020 new airplanes valued at $870 billion.

Domestic markets shifting toward single-aisle airlanes

Over the past 20 years, airlines in North America and other aviation markets have moved from flying widebody airplanes to flying single-aisle airplanes on domestic routes. In 1993, widebody airplanes supplied approximately 20 percent of capacity in North America. Today, that number has dwindled to 5 percent. We have also seen this trend in China, where almost 30 percent of capacity was on widebody airplanes in 1993, compared with 9 percent today.

Single-aisle airplanes, such as the 737-800, provide the efficiency and network flexibility airlines need to be competitive in short-to-medium-haul markets, where quick turnaround and airplane utilization are essential. LCCs and new entrants will stimulate traffic growth in China, as they have around the world. The LCC business model depends heavily on passenger demand for point-to-point service, which avoids connections at hubs and shortens travel time. Point-to-point service will help alleviate congestion at major hubs, such as Beijing, Shanghai, and Guangzhou. New LCCs, coupled with increased growth in established airlines, will drive a need for 4,340 new single-aisle airplanes.

New widebody airplanes opening new markets

New-technology widebody airplanes, such as the 787 and 777, are helping Chinese airlines expand their global networks and compete more effectively with international carriers. In 2013, Chinese airlines opened 10 new long-haul markets. Over the next 20 years, this expansion is expected to continue as traffic to Europe grows 6.1 percent; to North America, 6.3 percent; to Oceania, 6.6 percent; and to Africa, 7.4 percent. China will need 1,480 new widebody airplanes to support this market growth.

China traffic varies by market

China market value: $870 billion

China key indicators and new airplane markets

Robust traffic growth projected

South Asian air travel is expected to grow 8.3 percent per year over the next 20 years. Domestic, regional, and interregional travel to the Middle East and Southeast Asia will be the largest flows.

South Asia's demographics are favorable to air transportation growth. The region's population totaled 1.6 billion in 2013, and a growing share of this population is entering the workforce. The region's real GDP is forecast to grow an average 6.5 percent per year through 2033.

The 2014 elections of business-friendly candidates raised optimistic expectations for India's economy. If current economic policy liberalization, market reform, and investment trends continue, India's economy is projected to become the world's fourth largest.

Air India joined Star Alliance in June 2014, becoming the first Indian airline to enter a global alliance. Air India's membership adds more than 400 daily flights connecting more than 50 destinations to the alliance's network. Increased global connectivity could boost Air India's revenue by about 5 to 6 percent in the near term.

The Tata Group also moved swiftly to partner with foreign airlines, announcing tie-ups with AirAsia and SIA. Both links are structured as joint ventures, with the foreign airlines owning 49 percent and Indian partners owning 51 percent. AirAsia started India operations in June 2014; the venture with SIA, named Vistara, is expected to launch in the third or fourth quarter.

Market reforms support further growth

The Directorate General of Civil Aviation recently moved toward easing regulation of the Indian aviation market. A new startup airline (Air Costa) was approved in 2013 and several new operators gained Air Operators Permits and No Objection Certificates in 2014.

Also helpful is the expansion in 2014 of the visa-on-arrival program from 11 countries to 180, offering 30-day visas at 26 ports of entry. Under consideration are taxation reforms, including rationalization of aviation fuel taxes, which can currently reach 35 percent; reduction of taxes on maintenance, repair, and overhaul, which encourage Indian airlines to outsource MRO to neighboring regions; and reduction of duties on engine spare parts.

South Asia airlines are forcast to have world-leading growth

South Asia market value: $230 billion

South Asia key indicators and new airplane markets

Economic forcasts project modest growth

The Northeast Asia region encompasses Japan, North and South Korea, and Taiwan. The region's GDP is forecast to grow 1.5 percent over the next 20 years. Japan will grow moderately as it recovers from long-term stagnation. However, an aging and declining population will challenge that growth over the long term. Although Japan will remain the dominant economy in the region, South Korea and Taiwan currently provide almost one-third of the base and will generate much of the projected economic dynamism.

Fleet growth and modernization continues

Despite modest economic growth, air travel in Northeast Asia is forecast to grow 2.5 percent annually over the next 20 years. The region's major airline fleets are among the world's most modern and efficient. To maintain the resulting competitive edge, the region's airlines will require 1,340 new airplanes, valued at $280 billion. About 64 percent of these (860 airplanes) will be for replacement and 36 percent (490 airplanes) will be for growth.

Small and medium widebody airplanes will account for just under half of all deliveries. Single-aisle airplanes will account for 40 percent. Both the number of new regional jets and the number of large airplanes are projected to decline slightly. The requirement for new cargo airplanes is flat.

Low-cost carriers thrive

Northeast Asia was initially slow to adopt the low-cost model, but the emergence of low-cost carriers (LCC) is now a major driver of growth in the region. Whether established as subsidiaries of the major network carriers or as independent start-ups, LCCs are competing with the established airlines and among themselves to provide new, affordable opportunities for air travel. The strength and popularity of these new carriers are forcing the major international airlines of the region to reconsider their domestic strategies. The short distances between many of the destinations in the Asia Pacific region give the LCCs access not only to markets within Northeast Asia but also to locations in China and Southeast Asia.

Major airport expansion is proceeding

All the region's major airports have been modernized recently. Tokyo's Haneda has been upgraded to support expanded international operations and Narita to accommodate the new LCCs. Seoul's Incheon is being redesigned to create a major international hub that will serve all of Asia Pacific. Taiwan is improving its major airports to facilitate traffic across the straits in anticipation of relaxed travel restrictions with mainland China.

North Asia airline fleets will grow by more than a third

North Asia market value: $280 billion

North Asia key indicators and new airplane markets

Airlines expand operations

Southeast Asia's airlines are growing rapidly as the region continues to develop economically. Low-cost carriers (LCC) are expanding and gaining market share, stimulating passenger demand with attractive fares and new routes. Some Southeast Asia LCCs have launched subsidiaries or franchises to expand their operations into other countries or regions. A few LCCs have even ventured beyond single-aisle operations to provide widebody services that connect to destinations that exceed the range capabilities of single-aisle airplane. Network carriers have restructured to expand their product offerings for growth and increased competitiveness in the quickly developing marketplace. The heightened competition has increased the availability and affordability of air travel within the region.

Regional markets will continue to grow rapidly as ties within the Association of Southeast Asian Nations (ASEAN) strengthen, stimulating business and leisure travel. New, efficient airplanes with improved capabilities and lower operating costs are integral to carriers' business strategies. Southeast Asian airlines have dramatically increased their airplane orders to meet growing demand and to open new, direct, long-range markets. In fact, more than half of the region's forecast 2,460 single-aisle airplane deliveries over the next 20 years are already on order.

Liberalization opens routes

Regulatory changes and infrastructure improvements are crucial to air travel expansion. Relaxation of market regulations among ASEAN countries has removed many traditional barriers to growth. And flights among ASEAN capital cities have increased, marking an intermediate step in the path to a unified regional aviation market. Several carriers are aggressively expanding into new markets by acquiring or partnering with other carriers in Southeast Asia and surrounding regions. Governments and airport authorities in the region are eager to expand their aviation infrastructures and capitalize on increased trade and tourism.

Airlines bolster economic growth

International economic relationships and collaboration within the region continue to strengthen. Air transportation plays a vital role in the region's projected 4.7 percent annual GDP growth over the next 20 years. For example, affordable air travel options have stimulated growth in the region's services sector, including tourism and financial services. The region's strong air cargo operations enable efficient shipment of manufactured goods. Overall, air travel to, from, and within the region is projected to grow an average 6.6 percent annually over the next 20 years. Air travel within the region will lead with 7.7 percent annual growth, driving single-aisle airplane deliveries to reach 73 percent of total deliveries within the region.

Southeast Asia traffic varies by market

Southeast Asia market value: $500 billion

Southeast Asia key indicators and new airplane markets

The market continues to thrive

Oceania is a dynamic region of roughly 40 million people. Total air traffic is forecast to continue to grow at the annual rate of 4.8 percent over the next 20 years as connections to the neighboring Asia Pacific region and other world regions improve. Traffic growth within Oceania will slightly lag the overall rate, at 4.7 percent. Capacity between Oceania and Southeast Asia, the primary gateway to other world regions, is forecast to increase 5.1 percent per year. In addition, continued expansion of trade and tourism will spur the opening of more flights and new markets to North America, the Middle East, and China. Middle East airlines, bridging Oceania to Europe and Africa via stops in the Middle East, are forecast to spur the Middle East traffic flow to increase 6.5 percent. Traffic between China and Oceania will grow a robust 6.6 percent per year.

The region's airlines continue to evolve

Airlines within Oceania continue to evolve in response to economic conditions and competition. Airlines based in the Middle East, China, and Southeast Asia continue to rapidly increase their capacity to and from Oceania. The Qantas-owned low-cost carrier (LCC), Jetstar, continues to expand its cobranded subsidiaries throughout Asia. In 2013, Qantas entered a 10-year partnership with Emirates to collaborate on routes, pricing, scheduling, and other important aspects of operations. Virgin Australia acquired a major share of Tigerair Australia. Etihad Airways, Singapore Airlines, and Air New Zealand acquired ownership shares of Virgin Australia. The first 787s in the region arrived at Jetstar in 2013, allowing the airline to begin medium-haul LCC operations.

New airplanes are needed in the region

There will be a continual need for new airplanes in the region as traffic increases and airlines evolve. Over the next 20 years, Oceania is expected to need 1,000 new airplane deliveries, of which 760 will be single-aisle airplanes to transport people within the region or to nearby Southeast Asia. To meet demand for travel across the globe, 240 widebody airplanes will be required, of which approximately 160 will be small widebodies, 50 will be medium widebodies, and 30 will be large widebodies.

Oceania strong annual capacity growth on traffic flows

Oceania market value: $140 billion

Oceania key indicators and new airplane markets

Strong growth despite uncertainty

The European aviation market remained strong in 2013 despite recessions in some economies and sluggish recovery in others. Europe's GDP grew 0.4 percent in 2013 and is forecast to grow 1.9 percent annually through 2033. The Association of European Airlines reports that member airlines carried 0.2 percent more passengers in 2013 than in the previous year. Members of the European Low Fares Airline Association reported a 6.7 percent increase in passengers over 2012 levels. European airlines acquired more than 180 new airplanes in 2013, of which 78 percent were single aisle.

Aviation growth is expected to continue over the next 20 years, with European airlines forecast to acquire 7,450 new airplanes valued at $1,040 billion. Single-aisle airplanes will account for the majority of deliveries, representing a 79 percent share of total deliveries.

Although European aviation growth is not as rapid as aviation growth in the world's emerging economies, the region's large installed base of more than 4,300 airplanes supports a substantial demand for replacement airplanes. Replacement demand will account for 55 percent of Europe's total market for new airplanes.

Continued strategic change

Airline operations continue to evolve with the launch of new ventures and new business models. Long-haul service by European low-cost carriers (LCC) became a reality in 2013 with the delivery of the 787 to Norwegian Air Shuttle. The next 20 years are expected to bring additional mergers and acquisitions, along with increased collaboration with alliance partners around the world.

Large Middle East carriers have captured significant long-haul share from European network carriers by providing one-stop service from Europe to markets such as India, Australia, and Southeast Asia. These carriers are also changing the way that they compete for European business. One airline entered a global alliance, another acquired an equity stake in a European carrier, and another formalized a cooperative agreement with a non-European partner.

Large network airlines are tending to shift away from short-haul traffic, which is targeted by LCCs, and toward flowing passengers through their hubs on longer itineraries. LCCs have continued to add service in short-haul markets, with LCCs providing 40 percent of capacity on intra-Europe flights in 2013. Smaller flag carriers and charter airlines will be challenged to compete in an environment where LCCs dominate short-haul, point-to-point service, and large network carriers and their alliance partners exploit the cost advantages of megahubs for long-haul traffic.

Europe LCC share continues to grow

Europe market value: $1.04 trillion

Europe key indicators and new airplane markets

Continued traffic growth and financial stability

Passenger traffic, as measured in revenue passenger-miles, continues to rebound from the lows of the 2008/2009 downturn. Overall US passenger traffic has averaged 2 percent growth per year since 2009, ahead of capacity growth, which ranged from 1 to 2 percent per year over the same period. Capacity growth of the low-cost carriers (LCC) continues to outpace network carriers, averaging 4 percent in 2013, compared with 1 percent for network carriers. Total fleet capacity increased 2 percent in 2013, rebounding to pre-2008 levels. The average passenger load factor for 2013 was 83 percent, an all-time high for the US airline industry. Canada's two largest airlines outpaced the US airline traffic and capacity growth, posting 5 percent and 4 percent growth, respectively.

With the consolidation of the US airline industry over the past six years, a commanding 75 percent of both traffic and capacity is concentrated with the Big 3 network carriers: American, United, and Delta. Consequently, capacity growth slowed as the recently merged airlines continued to impose capacity discipline and to realign their networks to maximize profitability. LCCs accounted for a 20 percent share of traffic and capacity, a gain of half a percentage point compared with 2012.

Five major airline mergers since 2008 have made the US airline industry the beacon of profitability for the global airline industry. US airlines are expected to report record net income of $5.5 billion for 2013, and IATA forecasts net income of $8 billion for 2014. Profit margins before interest and taxes are also forecast to increase 1.5 percentage points to slightly more than 6 percent

U.S. Airline Industry Profitability: 1968-2012

North America market value: $870 billion

North America key indicators and new airplane markets

Economic growth slow but improving

The economic outlook for Latin America and the Caribbean is fairly upbeat. The World Bank predicts that growth in the region will strengthen steadily from 2.9 percent in 2014, to 3.2 percent in 2015 and to 3.7 percent in 2016. The region's expected growth is up significantly from last year's modest 2.5 percent growth. The top growth performers for 2014 are expected to be Panama (7.3 percent) and Peru (5.5 percent), while the region's economic powerhouses, Brazil and Mexico, are projected to grow 2.4 and 3.4 percent, respectively. Other countries in the region are also expecting robust growth rates, likely between 3 percent and 5 percent in 2014.

Air traffic growing with middle class

Political and macroeconomic stability, solid growth, poverty reduction, and a fairer income distribution buoyed regional growth in the 2000s. According to the World Bank, the region's middle-class population now outnumbers the poor population for the first time, a sign that Latin America is becoming a middle-class region. A robust aviation sector is crucial to sustaining this growth. Brazil, the world's seventh-largest economy, has the fourth-largest domestic aviation industry. By 2017, Brazil's total domestic passenger load will grow to 122 million (from 90 million in 2012), which will make Brazil the world's third-largest market.

Airline industry stabilizing

On the heels of significant consolidation, including the mergers of LAN with TAM, Avianca with TACA Airlines, GOL with Webjet, and Azul with TRIP, the region's airline industry is focusing on growth and profitability. By 2033, the region's airlines will need 2,950 new airplanes with a value of $340 billion. Although some of these airplanes will replace retiring jets, more than 70 percent will be for fleet growth, pushing the region's fleet to 3,530 airplanes, compared with 1,380 today. As airlines added new airplanes over the past decade, the average age of the region's fleet has plummeted from 14.8 years to 9.7 years. In addition, major carriers are cutting unprofitable routes and reducing capacity to achieve a more sustainable business environment.

LCC opportunities continuing

LLCs have seen rapid growth in Latin America's two largest markets, Brazil and Mexico, where they now have penetration rates of 46 and 63 percent, respectively. Significant opportunities still exist for LCCs to penetrate the markets of the other countries in the region. Existing LLCs are accordingly planning for growth, through expansion and through partnerships.

Latin America LCC seat share is mixed across regional flows

Latin America market value: $340 billion

Latin America key indicators and new airplane markets

Growth strategies

At the crossroads between Asia, Africa, and Europe, the Middle East is well positioned to compete for traffic connecting these regions. Total airline capacity in the Middle East grew 11 percent in 2013, led by Emirates, Qatar Airways, Etihad Airways, Saudia, and the region's low-cost carriers (LCC).

Booming demand in neighboring regions, plus local demand development, work together to drive the Middle East market. Hub aggregation is a key to enabling growth, because the region's central hubs allow carriers to serve hundreds of routes that have insufficient traffic to warrant point-to-point service. Alliances, partnerships, and equity stakes in airlines of neighboring regions also feed the Middle East hubs.

Business model innovation supports growth in the region as LCCs reduce short-haul fares, set up cross-border subsidiaries, and institute mobile booking portals to improve access to air transport services. Some LCCs are expanding their networks into previously underserved areas, such as the Commonwealth of Independent States. The LCC business model is evolving as carriers such as flydubai develop hybrid concepts that combine low-fare operations with business-class offerings.

Liberalization advances

There remains significant untapped potential for liberalization within the region. The Kingdom of Saudi Arabia is taking steps toward opening its underserved domestic markets. Two new airlines are expected to begin operations in 2014: SaudiGulf, an independent based in Dammam, and Al Maha, an offshoot of Qatar Airways. State-owned Saudia is expected to be privatized, although perhaps not quickly. Commentators note the opportunity for the relaxation of price controls on domestic flights in Saudi Arabia, which would support industry health and service quality.

Infrastructure and airspace development

Infrastructure investment tends to target new runways and terminals, focusing on the region's main hubs. New airports opened in Jebel Ali (Dubai) and Doha, runways were refurbished and upgraded at Dubai International, and construction started on a new terminal at Abu Dhabi International. Airport expansion is also underway at King Abdulaziz International (Jeddah) and King Khalid International (Riyadh).

Other challenges remain: Large sections of airspace remain under military control, reducing the airspace available for commercial traffic; and the region's air traffic control (ATC) systems are not centralized, leaving operators to contend with a patchwork of rules, agencies, and processes. Regional authorities are working to address these needs, and recent discussions of ATC coordination between the Gulf Cooperation Council countries and their neighbors serve as a sign of progress.

Middle East outpaces the World in international traffic growth

Middle East market value: $640 billion

Middle East key indicators and new airplane markets

Strong travel growth

The commercial aviation outlook for the Commonwealth of Independent States (CIS) foresees continued growth. The region's geographical size and diverse terrain make airline travel an attractive transportation option. Air travel will increase over the coming 20 years as personal incomes rise and air transport regulations are liberalized to make aviation services more available and affordable. The region's demand for new airplanes is increasing. Over the next 20 years, airlines in CIS will need 1,330 airplanes, valued at $150 billion.

The economies of the CIS are expected to continue to expand, with GDP growing 3.3 percent annually over the next 20 years. Russia's economy continues to be the region's largest, accounting for nearly 75 percent of the region's GDP in 2013. The economies of Ukraine and Kazakhstan follow that of Russia in size.

The Russian Transport Ministry's Federal Air Transport Agency reported that the number of passengers carried by Russian airlines rose to nearly 85 million in 2013, an increase of 14.2 percent compared with 2012.

Developing fleet

International traffic is expected to grow at an annual rate of 4.6 percent, nearly doubling over the next 20 years, as market regulation liberalizes. Airlines will need 180 widebody airplanes to handle the increased traffic. The new airplanes will help the region's airlines increase their international footprint. Within the region, traffic is expected to grow 4.3 percent, creating a need for 990 single-aisle airplanes. Although the region's fleet continues to grow, 52 percent of new airplane deliveries will be to replace older airplanes as they retire from the fleet. New airplanes, such as the 737 MAX and the 787 Dreamliner, are more efficient than the airplanes they replace, so overall fleet efficiency will improve.

Shifting business models

The low-cost carrier (LCC) business model has been expanding throughout the globe, though with limited success in the CIS. This may be changing, as recent increases in the number of LCC flights from neighboring regions and Aeroflot's intention to launch a low-cost subsidiary could signal the market's readiness for airline business model innovation. Rail transportation is still very popular in the region, but LCCs operating with competitive airfares and faster travel time may capture traffic from the rails.

CIS 1,330 new passenger airplanes required

CIS market value: $150 billion

CIS key indicators and new airplane markets

Economic growth prospects that rival Asia's

Growth of Africa's economies has accelerated. Despite the global recession and political unrest in North Africa, gross domestic product has increased 4 percent annually over the past decade, compared with an average 2.2 percent rise during the 1990s. Rising demand for natural resources, particularly from emerging economies in Asia and the Middle East, contribute to this growth. Consequently, Africa conducts half its trade with developing economic regions.

Africa's acceleration is more than a natural resources story. Its economies are diversifying as telecommunications, banking, and retail flourish. An economy based on rising incomes, consumption, employment, and productivity is emerging, and these trends are forecast to continue.

Twenty-five African countries have attained middle-income status as defined by the World Bank. The emergence of a middle class equal in size to India's makes consumption a major driver of economic growth. Africa's labor force is forecast to grow by 122 million people by 2020 and become a total workforce that will surpass that of China or India by 2035.

Robust demand for air travel

Traffic to, from, and within Africa is projected to grow about 6 percent per year for the next 20 years, driven by the economic outlook, increasing trade links, and the growing middle class.

Although air travel to and from Europe is Africa's largest market, stronger growth to and from emerging markets and within Africa indicates more balance in the future. Today, flows to Europe account for half of all Africa traffic. In 20 years, that share is projected to fall to one-third, owing to growth in emerging markets.

Growth and replacement driving airplane needs

Africa is forecast to require about 1,100 new airplanes over the next 20 years, approximately two-thirds of which will expand the region's fleet. Replacing the aging fleet is also an important component of demand. Although the average in-service age of Africa's mainline fleet has declined by approximately 25 percent over the past decade, it remains higher than the world average.

Single-aisle airplanes will continue to be the largest segment of African airline deliveries. They can serve the majority of routes in Africa's top three markets, where their versatility and ability to provide higher service levels make them attractive. Widebody airplanes, purchased by airlines that fly high-density and long-range routes, will account for almost half of the total delivery value to African airlines.